UNIVERSITY OF CALIFORNIA AT BERKELEY
Haas School of Business
PHDBA229A—Macro-Accounting/Interdisciplinary Capital Markets Research for PhDs
Fall 2015
Instructor:
Class location:
Class time:
Instructor location (office hours):
Professor Yaniv Konchitchki
C330
Wednesday 6:00-9:00pm (6:10-7:40, 8:00-9:00pm)
Room F496 (anytime, by appointment)
1. Course Objective and Format
This course objective is to let you gain familiarity with financial accounting research. The course
provides an opportunity to develop and execute your research ideas.
Each student will present a topic related to financial accounting research. Importantly, the assigned
student will be in charge of:
1. Posting on the class website one week in advance of the class:
A. The background papers listed on the syllabus as related to the topic.
B. Additional key/new papers related to the topic.
C. Any complementary material that can enrich the learning experience of the class, such as
more related papers, related news articles, and research design/econometrics explanations.
2. Printing for the class the notes/presentation outline of 1.A-1.B above.
All students are required to study the posted readings that the assigned presenter posted on class
website, in advance of our meetings so as to come prepared and contribute to the class.
Each class is organized in two parts:
In the first part, the assigned student will critically present extant research related to the selected
topic. The assigned student is in charge of leading the discussions. However, everyone is required to
participate by asking and answering questions. Note that the papers below are not organized in a
specific order; the assigned student should present the papers based on a logical flow.
In the second part, the assigned student will motivate and identify open research questions related to
the topic.
The assigned student should focus on the following when discussing each paper:
 What is the research question?
 How does it fit in the literature?
 What is the research design?
 What are the main findings and takeaways?
 What is the strongest/weakest point in the paper?
 Open related research questions?
2. Grading
Class Participation
Research Presentation
Research Proposal
Constructive Contribution
% of Grade
30
35
15
20
100%
Class Participation: Strongly encouraged. All forms of class participation will be considered for
grading purposes, excluding responses where the student is clearly unprepared or voluntary
contributions that are clearly not helpful.
Research Presentation: You need to demonstrate familiarity with the literature related to your topic.
You should lead a constructive discussion in class that will also inspire new research ideas.
Research Proposal: You are required to submit a written proposal, potentially related to your research
topic although not necessary. Your proposal should be organized as follows:
 Introduction: What is your research question and motivation?
 Background and Related Research: How does your research question relate to the extant
literature?
 Research Design: What is the research design that fits best your research question?
 Data: What are the data sources needed to address your research question?
 Preliminary Results (required only for 3rd and 4th year students): Present and describe your
empirical evidence (Tables and Figures).
 Potential Contribution to the Literature.
The written research proposals are due on the last day of class:
 4th-year students are required to present their proposals in the week before the last one.
 3rd- and 2nd-year students are required to present their proposals in the last week.
Constructive Contribution: Based on positive and quality contributions shared in and out of class.
Key factors that I will use in my assessment:
 A positive attitude that enriches the learning experience of the class (e.g., showing
excitement towards the course and the topic), in and out of the classroom.
 In-class participation.
 Enriching the learning experience of the students with additional related research papers,
sharing with the class (by printing for the class and/or uploading materials to bSpace) notes,
research articles, news articles related to the class, research design comments (e.g., how to
conduct an event study), helpful research summaries, etc.
 Helping other students.
Bad attitude, leaving or disturbing during class, and/or lack of attendance will have a negative effect
on the grade.
2
3. Tentative Course Outline
The course outline is likely to be revised as the course proceeds. The tentative course outline is as
follows:
Week
1
2
Date
09/02/2015
09/09/2015
3
09/16/2015
4
5
6
7
8
9
09/23/2015
09/30/2015
10/07/2015
10/14/2015
10/21/2015
10/28/2015
10
11/03/2015 (Tue)
11
12
11/11/2015
11/17/2015 (Tue)
11/23/2015
(Mon)
13
15
16
16
12/02/2015
12/07/2015
(Mon; Strictly
Mandatory)
12/10/2015
Topic
Topic 1: Introduction and Overview of my Research (Yaniv)
Topic 2: Cost of Capital; Accounting Quality (Henry)
Topic 3: Information Content of Earnings Announcements and the
Post-Earnings-Announcement Drift (Nika + Help)
Topic 4: Earnings Management (Sam + 20 min by Merve)
External Presentation
External Presentation
Topic 5: Accruals and Cash Flows (Jin)
Topic 6: Financial Statement Analysis (Annika + John)
Topics 7-8 Combined (Margaret + Sumit + Nika):
Topic 7: Accounting Information and the Macroeconomy
Topic 8: Ongoing Macro-Accounting Research
Topic 9: Fall Recess
Topic 10: Mispricing (Jin)
Topics 11-12 Combined (several presenters):
Topic 11: Highlights from Various Research Topics
- Debt Contracting (30 min by Sumit)
- Textual Analysis (20 min by Sam)
- Corporate Governance (30 min by Nika)
- Accounting and the Bond Market
- Other
Topic 12: Additions; Recent Research Highlights; Concurrent
Research Updates
Topic 13: Presentations of Research Proposals (split between students
in years 2, 3, and 4)
Topic 13: Presentations of Research Proposals (Contd.)
Official Classes End Date
Further details are as follows:
3
TOPIC 1: INTRODUCTION AND OVERVIEW OF MY RESEARCH

Konchitchki, Y. 2011. “Inflation and Nominal Financial Reporting: Implications for
Performance and Stock Prices.” The Accounting Review 86 (3), 1045–1085.

Konchitchki, Y. 2013. “Accounting and the Macroeconomy: The Case of Aggregate PriceLevel Effects on Individual Stocks.” Financial Analysts Journal 69 (6), 40–54.

Konchitchki, Y, and P. N. Patatoukas. 2014. “Accounting and Gross Domestic Product.”
Journal of Accounting and Economics 57 (1-2), 76–88.

Barth, M. E., Y. Konchitchki, and W. R. Landsman. 2013. “Cost of Capital and Earnings
Transparency.” Journal of Accounting and Economics 55 (2-3), 206–224.

DeFond, M. L., Y. Konchitchki, J. L. McMullin, and D. E. O’Leary. 2013. “Capital Markets
Valuation and Accounting Performance of Most Admired Knowledge Enterprise (MAKE)
Award Winners.” Decision Support Systems 56 (1), 348–360.

Konchitchki, Y., Y. Luo, M. L. Ma, and F. Wu. 2015. “Accounting-Based Downside Risk,
Cost of Capital, and the Macroeconomy.” Review of Accounting Studies, forthcoming.

DeFond, M. L., E. Bartov, and Y. Konchitchki. 2015. “The Consequences of Untimely
Quarterly and Annual Financial Reporting.” Accounting Horizons, forthcoming.

Konchitchki, Y, and P. N. Patatoukas. 2014. “Taking the Pulse of the Real Economy Using
Financial Statement Analysis: Implications for Macro Forecasting and Stock Valuation.”
The Accounting Review 89 (2), 669–694.
4
TOPIC 2: COST OF CAPITAL; ACCOUNTING QUALITY

Botosan, C. A. 1997. “Disclosure Level and the Cost of Equity Capital.” The Accounting
Review 72, 323–349.

(Discuss only a few minutes) Botosan, C. A., and M. Plumlee. 2002. “A Re-Examination of
Disclosure Level and Expected Cost of Equity Capital.” Journal of Accounting Research
40, 21–40.

Barth, M. E., Y. Konchitchki, and W. R. Landsman. 2013. “Cost of Capital and Earnings
Transparency.” Journal of Accounting and Economics 55 (2-3), 206–224.

Konchitchki, Y., Y. Luo, M. L. Ma, and F. Wu. 2015. “Accounting-Based Downside Risk,
Cost of Capital, and the Macroeconomy.” Review of Accounting Studies, forthcoming.

Francis, J., R. LaFond, P. Olsson, and K. Schipper. 2004. “Costs of Equity and Earnings
Attributes.” The Accounting Review 79, 967–1010.

Frankel R., and C. M. C. Lee. 1998. “Accounting Valuation, Market Expectation, and CrossSectional Stock Returns.” Journal of Accounting and Economics 25 (3), 283–319.

Core, J. E., W. R. Guay, and R. S. Verdi. 2008. “Is Accruals Quality a Priced Risk Factor?”
Journal of Accounting and Economics 46, 2–22.

Dechow, P. M., and I. D. Dichev. 2002. “The Quality of Accruals and Earnings: The Role of
Accrual Estimation Errors.” The Accounting Review 77, 35–59.

(Discuss only a few minutes) Diamond, D. W., and R. E. Verrecchia. 1991. “Disclosure,
Liquidity, and the Cost of Capital.” The Journal of Finance 46, 1325–1359.

Gebhardt, W. R., C.M.C. Lee, and B. Swaminathan. 2001. “Toward an Implied Cost-ofCapital.” Journal of Accounting Research, 135–176.

Easton, P., and S. Monahan. 2005. “An Evaluation of Accounting-Based Measures of
Expected Returns.” The Accounting Review 80, 501–538.

Lambert, R., C. Leuz, and R. Verrecchia. 2007. “Accounting Information, Disclosure, and
the Cost of Capital.” Journal of Accounting Research 45, 385–420.

Amihud, Y., and H. Mendelson. 1986. “Asset Pricing and the bid-ask spread. Journal of
Financial Economics 17, 223–249.
5
TOPIC 3: INFORMATION CONTENT OF EARNINGS ANNOUNCEMENTS AND THE POSTEARNINGS-ANNOUNCEMENT DRIFT

Ball, R., and P. Brown. 1968. “An Empirical Evaluation of Accounting Income Numbers.”
Journal of Accounting Research, 159–178.

Beaver, W. H. 1968. “The Information Content of Annual Earnings Announcements.”
Journal of Accounting Research, 67–92.

Landsman, W. R., and E. Maydew. 2002. “Has the Information Content of Quarterly
Earnings Announcements Declined over the Past Three Decades?” Journal of Accounting
Research, 797–808.

Kothari, S. P. 2001. “Capital Markets Research in Accounting.” Journal of Accounting and
Economics, 105–231.

Bernard, V., and J. Thomas. 1990. “Evidence That Stock Prices Do Not Fully Reflect the
Implications of Current Earnings for Future Earnings.” Journal of Accounting and
Economics, 305–340.

Konchitchki, Y., and D. E. O’Leary. 2011. “Event Study Methodologies in Information Systems
Research.” International Journal of Accounting Information Systems 12 (2), 99–115.
6
TOPIC 4: EARNINGS MANAGEMENT

Dechow, P. M., R.G. Sloan, and A. P. Sweeney. 1995. “Detecting Earnings Management.”
The Accounting Review 7 (2), 193-225.

Stubben, S. F. 2010. “Discretionary Revenues as a Measure of Earnings Management.” The
Accounting Review 85 (2), 695-717.

McNichols, M., and G. P. Wilson. 1988. “Evidence of Earnings Management from the
Provision for Bad Debts.” Journal of Accounting Research 26, 1-31.

McNichols, M. F. 2000. “Research Design Issues in Earnings Management Studies.” Journal
of Accounting and Public Policy 19, 313-345.

Dechow, P. M., A. P. Hutton, J. H. Kim, and R. G. Sloan. 2012. “Detecting Earnings
Management: A New Approach.” Journal of Accounting Research 50 (2), 275-334.
Some background on accruals:

Sloan, R. G. 1996. “Do Stock Prices Fully Reflect Information in Accruals and Cash Flows
about Future Earnings?” The Accounting Review 71 (3), 289–315.

Dechow, P. 1994. “Accounting Earnings and Cash Flows as Measures of Firm Performance:
The Role of Accounting Accruals.” Journal of Accounting and Economics, 3–42.
7
TOPIC 5: ACCRUALS AND CASH FLOWS

Barth, M. E., D. P. Cram, and K. K. Nelson. 2001. “Accruals and the Prediction of Future
Cash Flows.” The Accounting Review 76 (1), 27–58.

Barth, M., and A. Hutton. 2004. “Analyst Earnings Forecast Revisions and the Pricing of
Accruals,” Review of Accounting Studies, 59–96.

Barth, M., W. Beaver, J. Hand, and W. Landsman. 1999. “Accruals, Cash Flow, and Equity
Values.” Review of Accounting Studies, 205–229.

Dechow, P. 1994. “Accounting Earnings and Cash Flows as Measures of Firm Performance:
The Role of Accounting Accruals.” Journal of Accounting and Economics, 3–42.

Dechow, P., S. P. Kothari, and R. Watts. 1998. “The Relation between Earnings and Cash
Flows.” Journal of Accounting and Economics 25, 133–168.
8
TOPIC 6: FINANCIAL STATEMENT ANALYSIS

Fairfield, P. M., and T. L. Yohn. 2001. “Using Asset Turnover and Profit Margin to Forecast
Changes in Profitability.” Review of Accounting Studies 6 (4), 371–385.

Soliman, M. T. 2008. “The Use of DuPont Analysis by Market Participants”. The
Accounting Review 83 (3), 823–853.

Konchitchki, Y, and P. N. Patatoukas. 2014. “Taking the Pulse of the Real Economy Using
Financial Statement Analysis: Implications for Macro Forecasting and Stock Valuation.”
The Accounting Review 89 (2), 669–694.

Piotroski, J. 2000. “Value Investing: The Use of Historical Financial Statement Information
to Separate Winners from Losers.“ Journal of Accounting Research, 1–41.

Ou, J. A., and S. H. Penman. 1989. “Financial Statement Analysis and the Prediction of
Stock Returns.” Journal of Accounting and Economics 11 (4), 295–329.
Background/related research:

McLean, R. D., and J. Pontiff. 2015. “Does Academic Research Destroy Return
Predictability?” Journal of Finance, forthcoming.
o Read introduction and browse through internet appendix Table A1.III.

Engelberg, J., R. D. McLean, and J. Pontiff. 2015. “Anomalies and News.” Working paper.
o Read introduction

Allee, K. D., and T. L. Yohn. 2009. “The Demand for Financial Statements in an
Unregulated Environment: An Examination of the Production and Use of Financial
Statements by Privately Held Small Businesses.” The accounting Review 84 (1), 1–25.
o Read introduction and section V.

Ohlson, J. A. 1980. “Financial Ratios and the Probabilistic Prediction of Bankruptcy.”
Journal of Accounting Research 18 (1), 109–131.
o Focus on pages 109-110, 118-119 (the variables used in the model) and 121 (Table 4).

Hope, O. K., and J. C. Langli. 2010. “Auditor Independence in a Private Firm and Low
Litigation Risk Setting.” The Accounting Review 85 (2), 573–605.
o Read abstract and the Sample subsection on pages 580-582.
9
TOPIC 7: ACCOUNTING INFORMATION AND THE MACROECONOMY
TOPIC 8: ONGOING MACRO-ACCOUNTING RESEARCH

Konchitchki, Y. 2011. “Inflation and Nominal Financial Reporting: Implications for
Performance and Stock Prices.” The Accounting Review 86 (3), 1045–1085.

Konchitchki, Y., Y. Luo, M. L. Ma, and F. Wu. 2015. “Accounting-Based Downside Risk,
Cost of Capital, and the Macroeconomy.” Review of Accounting Studies, forthcoming.

Anilowski, C., M. Feng, and D. J. Skinner. 2007. “Does Earnings Guidance Affect Market
Returns? The Nature and Information Content of Aggregate Earnings Guidance.” Journal of
Accounting and Economics 44 (1-2), 36–63.

Ball, R., G. Sadka, and R. Sadka. 2009. “Aggregate Earnings and Asset Prices.” Journal of
Accounting Research 47 (5), 1097–1133.

Cready, W. M., and U. G. Gurun. 2010. “Aggregate Market Reaction to Earnings
Announcements.” Journal of Accounting Research 48 (2), 289–334.

Jorgensen, B., J. Li, and G. Sadka. 2012. “Earnings Dispersion and Aggregate Stock
Returns.” Journal of Accounting and Economics 53 (1), 1–20.

Li, N., S. A. Richardson, and A. I. Tuna. 2013. “Macro to Micro: Country Exposures, Firm
Fundamentals and Stock Returns.” Journal of Accounting and Economics, forthcoming.

Kothari, S., J. W. Lewellen, and J. B. Warner. 2006. “Stock Returns, Aggregate Earnings
Surprises, and Behavioral Finance.” Journal of Financial Economics 79 (3), 537–568.

Konchitchki, Y, and P. N. Patatoukas. 2014. “Accounting and Gross Domestic Product.”
Journal of Accounting and Economics 57 (1-2), 76–88.

L. Shivakumar, and O. Urcan. 2015. “Aggregate Earnings Surprises and Inflation Forecasts.”
Working Paper.

Konchitchki, Y, and P. N. Patatoukas. 2014. “Taking the Pulse of the Real Economy Using
Financial Statement Analysis: Implications for Macro Forecasting and Stock Valuation.”
The Accounting Review 89 (2), 669–694.

Konchitchki, Y. 2013. “Accounting and the Macroeconomy: The Case of Aggregate PriceLevel Effects on Individual Stocks.” Financial Analysts Journal 69 (6), 40–54.

Dichev, I. D. 2014. “Quality Earnings: Insights from Comparing GAAP to NIPA Earnings.”
Working Paper.

Konchitchki, Y. 2015. “Accounting Valuation and Cost of Capital Dynamics: Theoretical and
Empirical Macroeconomic Aspects.” Abacus, forthcoming.

Balakrishnan, K., J. E. Core, and R. S. Verdi. 2014. “The Relation Between Reporting
Quality and Financing and Investment: Evidence from Changes in Financing Capacity.”
Journal of Accounting Research 52 (1), 1–36.
10

Konchitchki, Y., and P. N. Patatoukas. 2015a. “Accounting and the Macroeconomy:
Accounting Quality at the Macro Level.” Working Paper.

Konchitchki, Y., and P. N. Patatoukas. 2015b. “Revisions to Official Macroeconomic
Announcements and Firm-Level Financial Information.” Working Paper.
Background papers:

Fama, E. F. 1981. “Stock Returns, Real Activity, Inflation, and Money.” The American
Economic Review 71 (4), 545–565.

Fama, E. F., and W. G. Schwert. 1977. “Asset Returns and Inflation.” Journal of Financial
Economics 5 (2), 115–146.
11
TOPIC 10: MISPRICING

Fama, E. 1991. “Efficient Capital Markets: II” The Journal of Finance, 1575–1617.

Abarbanell, J., and V. Bernard. 1992. “Tests of Analysts’ Overreaction/Underreaction to
Earnings Information as an Explanation for Anomalous Stock Price Behavior.” The Journal
of Finance, 1181–1207.

Sloan, R. G. 1996. “Do Stock Prices Fully Reflect Information in Accruals and Cash Flows
about Future Earnings?” The Accounting Review 71 (3), 289–315.

Ball, R., and E. Bartov. 1996. “How Naive is the Stock Market’s Use of Earnings
Information?” Journal of Accounting and Economics 21 (3), 319–337.

Skinner, D., and R. Sloan. 2002. “Earnings Surprises, Growth Expectations, and Stock
Returns or Don’t Let and Earnings Torpedo Sink Your Portfolio.” Review of Accounting
Studies, 289–312.

Konchitchki, Y. 2013. “Accounting and the Macroeconomy: The Case of Aggregate PriceLevel Effects on Individual Stocks.” Financial Analysts Journal 69 (6), 40–54.

Grossman, S. J., and J. E. Stiglitz. 1980. “On the Impossibility of Informationally Efficient
Markets.” The American Economic Review 70 (3), 393–408.
12
TOPIC 11: HIGHLIGHTS FROM VARIOUS RESEARCH TOPICS
TOPIC 12: ADDITIONS; RECENT RESEARCH HIGHLIGHTS; CONCURRENT RESEARCH
UPDATES
- M&As
- Textual Analysis
- Corporate Governance
- Accounting and the Bond Market
- Other
A: ACCOUNTING AND THE BOND MARKET
 Easton, P., S. Monahan, and F. P. Vasvari. 2009. “Some initial evidence on the role of
accounting earnings in the bond market.” Journal of Accounting and Economics 47, 721–
766.

DeFond, M. L., and J. Zhang. 2013. “The Timeliness of the Bond Market Reaction to Bad
Earnings News.” Contemporary Accounting Research, forthcoming.

Bhojraj, S., and B. Swaminathan. 2009. “How does the Corporate Bond Market Value
Capital Investments and Accruals?” Review of Accounting Studies 14 (1), 31–62

Kwan, S. H. 1996. “Firm-Specific Information and the Correlation between Individual
Stocks and Bonds” Journal of Financial Economics 40 (1), 63–80.

Callen, J., J. Livnat, and D. Segal. 2009. “The Impact of Earnings on the Pricing of Credit
Default Swaps.” The Accounting Review 84, 1363–1394.

Lok, S., and S. Richardson. 2011. “Credit Markets and Financial Information.” Review of
Accounting Studies 16, 487–500.
B. OTHER
 Kravet, T. D. 2014. “Accounting Conservatism and Managerial Risk-Taking: Corporate
Acquisitions.” Journal of Accounting and Economics 57 (2-3), 218–240.

Louis. 2005. “Acquirers' Abnormal Returns and the Non-Big 4 Auditor Clientele
Effect.” Journal of Accounting and Economics 40 (), 75–99.
TOPIC 13: PRESENTATIONS OF RESEARCH PROPOSALS
12/10/2013: OFFICIAL END DATE OF CLASSES
13